B-137357, AUG. 19, 1959

B-137357, AUG. 19, 1959

TO MR. RALPH E. CASEY:

REFERENCE IS MADE TO YOUR LETTERS OF NOVEMBER 13, 1958, AND JANUARY 9, 1959, CONCERNING A REQUEST MADE BY OUR CLAIMS DIVISION IN A LETTER DATED FEBRUARY 10, 1958, TO THERMA PRODUCTS COMPANY, INC., 42 WARREN STREET, CHARLESTOWN, MASSACHUSETTS, FOR PAYMENT OF THE SUM OF $14,116.35, DETERMINED AS THE EXCESS COST TO THE GOVERNMENT WHICH RESULTED FROM THAT COMPANY'S DEFAULT UNDER ARMY ORDNANCE CONTRACT NO. DA-28-017-501-ORD-2128 DATED MARCH 9, 1956.

THE CONTRACT WAS AWARDED PURSUANT TO AN INVITATION FOR BIDS ISSUED FEBRUARY 6, 1956, AS TO WHICH THERMA PRODUCTS COMPANY, INC., WAS THE SUCCESSFUL BIDDER ON ITEMS A AND C. ITEM A CALLED FOR DELIVERY OF 1,500 AUXILIARY STORAGE CASES AND ITEM C CALLED FOR DELIVERY OF 1,500 STORAGE BOXES. ON ITEM A, THERMA PRODUCTS COMPANY, INC., QUOTED A UNIT PRICE OF $4.75 AND A TOTAL PRICE OF $7,125. ON ITEM C, THERMA PRODUCTS COMPANY, INC., QUOTED A UNIT PRICE OF $20.50 AND A TOTAL PRICE OF $30,750.

DEFAULT TERMINATION ACTION WAS TAKEN WITH RESPECT TO 500 UNITS OF EACH OF THE TWO ITEMS COVERED BY THE CONTRACT OF MARCH 9, 1956, AND THE ENTIRE CONTRACT WAS TERMINATED FOR DEFAULT UPON THE CONTINUED FAILURE OF THE CONTRACTOR TO SUBMIT PILOT MODELS MEETING THE CONTRACT SPECIFICATIONS. THE GOVERNMENT ENTERED INTO TWO CONTRACTS WITH THE PROGRESSITRON CORPORATION FOR DELIVERY OF 1,000 UNITS OF EACH OF THE TWO ITEMS. THE REPLACEMENT CONTRACTOR DELIVERED 993 AUXILIARY STORAGE CASES AND 1,000 STORAGE BOXES, FOR WHICH THE GOVERNMENT BECAME OBLIGATED TO PAY TO THE PROGRESSITRON CORPORATION THE NET AMOUNT OF $39,333.10, AFTER DEDUCTION OF A PROMPT PAYMENT DISCOUNT OF 1/2 OF ONE PERCENT FROM INVOICES COVERING SUCH DELIVERIES. UNDER THE TERMS OF THE CONTRACT WITH THERMA PRODUCTS COMPANY, INC., SIMILAR QUANTITIES OF THE SUPPLIES INVOLVED WOULD HAVE COST THE GOVERNMENT THE SUM OF $25,216.75. UNDER ORDINARY CIRCUMSTANCES, THE DIFFERENCE OF $14,116.35 WOULD BE CHARGEABLE TO THERMA PRODUCTS COMPANY, INC.

AN APPEAL WAS MADE TO THE ARMED SERVICES BOARD OF CONTRACT APPEALS AGAINST THE ASSESSMENT OF EXCESS COSTS IN THIS MATTER, WHICH APPEAL WAS DENIED BY THE BOARD OF DECISION OF AUGUST 2, 1957. THE DECISION REFERS TO A DIFFICULTY ENCOUNTERED BY THE APPELLANT IN ATTEMPTING TO USE HINGES FOR THE AUXILIARY CASES WHICH DID NOT MEET THE CONTRACT SPECIFICATIONS. HOWEVER, THE APPEAL BOARD CONSIDERED THAT SUCH DIFFICULTY, AS WELL AS THE FACT THAT A DEVIATION FROM SPECIFICATIONS HAD BEEN AUTHORIZED "WITHOUT ANY CHANGE IN CONTRACT PRICE," WAS NOT SUFFICIENT TO JUSTIFY A FINDING THAT THE DEFAULT WAS EXCUSABLE WITHIN THE MEANING OF THE CONTRACT PROVISIONS RESPECTING DELAYS IN PERFORMANCE AND TERMINATION FOR DEFAULT.

THE APPEAL BOARD'S DECISION OF AUGUST 2, 1957, ALSO REFERS TO THE APPELLANT'S ATTEMPT TO SECURE A CONTRACT PRICE INCREASE OF $10 PER AUXILIARY CASE (ITEM A), BASED UPON THE AUTHORIZED CHANGE IN SPECIFICATIONS AND A CONTENTION THAT APPELLANT HAD BID TOO LOW A PRICE ON ITEM C. THE BOARD FOUND THAT THE AUTHORIZED CHANGE IN SPECIFICATIONS WAS ISSUED AT THE REQUEST OF AND FOR THE BENEFIT OF APPELLANT; AND THAT THE CONTRACTING OFFICER WAS WITHOUT AUTHORITY TO INCREASE THE CONTRACT PRICE WITHOUT A CONSIDERATION OR BENEFIT RUNNING TO THE GOVERNMENT. CONCERNING THE MATTER OF THE CLAIMED MISTAKE IN BID, THE BOARD'S DECISION IS, IN PERTINENT PART, AS FOLLOWS:

"* * * IN EXPLANATION OF THE LOW BID THE PRESIDENT OF THE APPELLANT TESTIFIED THAT HE WAS ABSENT AT THE TIME THE BID WAS MADE AND THAT THE FOREMAN OF HIS PLANT, WHO WAS SO AUTHORIZED, ACTUALLY MADE THE BID. OTHER EXPLANATION WAS OFFERED.

"THE APPELLANT ALLEGES A MUTUAL MISTAKE IN ITS BID. A MISTAKE ON ITS PART IN SUBMITTING A LOW BID AND A MISTAKE BY THE CONTRACTING OFFICER IN NOT RECOGNIZING AN IMPROVIDENT BID.

"THE RECORD SHOWS THAT THE ORDNANCE CORPS HAD ENTERED INTO A CONTRACT IN 1953 FOR THE AUXILIARY CASE AT $7.30 AND THE STORAGE BOX AT $32.22. 1955 THE SAME ITEMS HAD BEEN PURCHASED AT $6.75 FOR THE AUXILIARY CASE AND $32.69 FOR THE STORAGE BOX. THE ABSTRACT OF BIDS IN THE BIDDING ON THE CONTRACT ON APPEAL SHOWS THAT THE NEXT LOWEST BID TO THE APPELLANT'S OF $4.75 WAS $5.90 FOR THE AUXILIARY CASE. THE NEXT LOWEST BID FOR THE STORAGE BOX IS SHOWN TO HAVE BEEN $30.50 AS AGAINST THE APPELLANT'S BID OF $20.50.

"THE CONTRACTING OFFICER TESTIFIED THAT THE PAST HISTORY OF THE PURCHASE OF THESE ITEMS AS OUTLINED ABOVE WAS NOT SUFFICIENT TO INDICATE A TREND AND NOT SUFFICIENT TO CALL HIS ATTENTION TO THE FACT THAT THE APPELLANT'S BID WAS IMPROVIDENT. IN ANY EVENT, HE DID NOT TAKE THE MATTER UP WITH THE APPELLANT. GOVERNMENT INSPECTORS MADE A THOROUGH CHECK OF THE APPELLANT'S FACILITIES AND SO FAR AS THE RECORD INDICATES DID NOT DISCUSS THE MATTER OF THE AMOUNT OF THE BID WITH THE APPELLANT.

"THE REAL BASIS FOR THE CLAIM OF $10.00 PER AUXILIARY CASE IS THAT THE APPELLANT UNDER-BID ON THE STORAGE BOXES BY AT LEAST $10.00 PER BOX. WHETHER OR NOT THE CONTRACTING OFFICER WAS DUTY BOUND TO MAKE INQUIRY AS TO THE APPELLANT'S BID, WE ARE NOT PREPARED TO SAY. THIS BOARD HAS NO AUTHORITY TO MODIFY THE BID OR CONTRACT OF THE APPELLANT BASED UPON AN IMPROVIDENT BID OR TO CORRECT A MISTAKE AFTER THE AWARD OF THE CONTRACT.'

YOU REFERRED IN YOUR LETTER OF NOVEMBER 13, 1958, TO THE ALLEGED MISTAKE IN BID AS THE CONTRACTOR'S DEFENSE TO THE GOVERNMENT'S CLAIM FOR $14,116.35. WITH RESPECT TO THE QUESTION AS TO WHETHER THE CONTRACTING OFFICER SHOULD HAVE BEEN ON CONSTRUCTIVE NOTICE OF ERRORS IN THE BID PRICES, YOU STATED THAT THERE WAS LITTLE DOUBT BUT THAT THE BID OF THERMA PRODUCTS WAS COMPLETELY OUT OF LINE ON BOTH ITEMS A AND C. IT WAS INDICATED IN YOUR LETTER THAT, AS COMPARED WITH THE CONTRACT PRICES OF $4.75 AND $20.50, FOUR OTHER BIDDERS QUOTED PRICES OF $5.90, $6.35, $6.60 AND $6.75 FOR THE AUXILIARY STORAGE CASES; AND PRICES OF $30.50, $31.95, $32.69 AND $39.60 FOR THE STORAGE BOXES. YOU SUGGESTED THAT IT WOULD BE DIFFICULT TO ESTABLISH THE EXACT AMOUNTS OF THE MISTAKES MADE BY THERMA PRODUCTS BUT YOU PRESENTED WORKSHEETS PURPORTING TO REPRESENT THE ORIGINAL COST ESTIMATES FOR PORTIONS OF THE WORK AND MATERIALS NECESSARY TO COMPLETE THE CONTRACT, AND ANALYSES PREPARED LATER WHICH PURPORT TO SHOW THAT THE FINAL PRICING ESTIMATES DID NOT INCLUDE THE COST OF ABOUT $750 FOR ONE OF THE COMPONENTS OF THE STORAGE BOX NOR AN ASSEMBLY COST OF APPROXIMATELY $10 PER UNIT FOR THE STORAGE BOXES; NOR COSTS OF APPROXIMATELY $820 AND $375 FOR RUBBER MOLD AND PACKING AND SHIPPING OF THE 1,500 AUXILIARY STORAGE CASES.

THE ESTABLISHED RULE IS THAT, WHEN A BIDDER HAS MADE A MISTAKE IN THE SUBMISSION OF A BID AND THE BID HAS BEEN ACCEPTED, HE MUST BEAR THE CONSEQUENCES OF THE MISTAKE UNLESS THE MISTAKE WAS MUTUAL OR THE ERROR WAS SO APPARENT THAT IT MUST BE PRESUMED THAT THE CONTRACTING OFFICER KNEW OF THE MISTAKE AND SOUGHT TO TAKE ADVANTAGE THEREOF. 23 COMP. GEN. 596, 598. WE DO NOT BELIEVE THAT THE THERMA PRODUCTS BID ON THE AUXILIARY STORAGE BOXES WAS COMPLETELY OUT OF LINE WITH THE PRICES QUOTED BY OTHER BIDDERS OR THAT A MERE COMPARISON OF BIDS WOULD HAVE BEEN SUFFICIENT TO HAVE PLACED THE CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF ANY MISTAKE IN THE THERMA PRODUCTS BID ON EITHER ITEM A OR ITEM C. THERE IS NO EVIDENCE THAT THE GOVERNMENT HAD MADE AN INDEPENDENT INVESTIGATION AS TO THE COSTS INVOLVED IN THE PRODUCTION OF THE PARTICULAR ITEMS AND IT WOULD APPEAR THAT THE BID PRICES THEREFOR COULD VARY TO A CONSIDERABLE EXTENT. THE RANGES IN BID PRICES WERE HIGH AND THERE WAS NOTHING ON THE FACE OF THE BID OF THERMA PRODUCTS COMPANY, INC., TO SUGGEST THE PROBABILITY OF ANY MISTAKE.

SUCH MISTAKES AS WERE MADE WERE UNILATERAL, NOT MUTUAL, AND IT IS OUR OPINION THAT THE VALIDITY OF THE CONTRACT CANNOT BE QUESTIONED ON THE GROUND THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ON CONSTRUCTIVE NOTICE OF ERROR IN THE BID AT THE TIME OF ITS ACCEPTANCE. THE RESPONSIBLE FOR THE PREPARATION OF THE BID WAS THAT OF THE THERMA PRODUCTS COMPANY, INC., AND THE FOLLOWING STATEMENT OF THE COURT OF CLAIMS IN THE CASE OF FRAZIER-DAVIS CONSTRUCTION COMPANY V. UNITED STATES, 100 C.CLS. 120, 163, WOULD APPEAR TO BE APPLICABLE TO THE PRESENT SITUATION:

"* * * THE PARTIES ARE DEALING AT ARMS LENGTH AND BIDDERS ARE PRESUMED TO BE QUALIFIED TO ESTIMATE THE PRICE AT WHICH THEY CAN PERFORM THE WORK SPECIFIED AT A REASONABLE PROFIT. IF THEY FAIL TO DO SO, AS PLAINTIFF DID IN THIS CASE, THE GOVERNMENT CANNOT FOR THAT REASON BE HELD FOR THE RESULTING LOSS.'

THE CONCLUSION APPEARS TO BE REQUIRED THAT, UPON ACCEPTANCE OF THE THERMA PRODUCTS COMPANY'S BID, THE RIGHT VESTED IN THE GOVERNMENT TO REQUIRE PERFORMANCE STRICTLY IN ACCORDANCE WITH ITS TERMS, AND, IN THE ABSENCE OF A STATUTE SO PROVIDING, NO OFFICER OF THE GOVERNMENT HAS AUTHORITY TO GIVE AWAY OR SURRENDER THAT RIGHT WITHOUT ADEQUATE CONSIDERATION. SIMPSON V. UNITED STATES, 172 U.S. 372; UNITED STATES V. AMERICAN SALES CORPORATION 27 F.2D 389, AFFIRMED 32 F.2D 141, CERTIORARI DENIED, 280 U.S. 574; PACIFIC HARDWARE AND STEEL COMPANY V. UNITED STATES, 49 C.CLS. 327, 335; BAUSCH AND LOMB OPTICAL COMPANY V. UNITED STATES, 78 ID. 584, 607.

ACCORDINGLY, YOU ARE ADVISED THAT, UNLESS THE THERMA PRODUCTS COMPANY, INC., REMITS THE ABOVE STATED AMOUNT OF $14,116.35 TO OUR OFFICE WITHIN 30 DAYS FROM THE DATE OF THIS LETTER, THE MATTER WILL BE REFERRED TO THE ATTORNEY GENERAL OF THE UNITED STATES FOR THE INSTITUTION OF APPROPRIATE COLLECTION PROCEEDINGS.